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KNOW THE REGS: CULTIVATION OPPORTUNITIES

When it comes to cannabis growing in Mass, these tiers go to 11

When medical marijuana regulations were the cannabis law of the land in the Commonwealth, all businesses were required to be vertically integrated, managing both their cultivation facilities and their retail operations. Under the Cannabis Control Commission’s new adult use regulations, however, businesses may solely specialize in cultivation with the possibility of selling to one or more dispensaries that do not have to be owned by the cultivator.

Each licensee may apply to grow up to 100,000 square feet of canopy, or that much cannabis flowering among up to three licensed cultivation spaces. The acreage that cultivators are permitted to grow is decided on a scaling tier system. Tier 1 allows up to 5,000 square feet of crop, Tier 2 allows anywhere between 5,001 and 10,000, and every subsequent tier ups the ante by 10,000. Tier 11 caps it off at 100,000 square feet, the aforementioned maximum amount of canopy allowed for any licensee.

According to Will Luzier, the political director of the Marijuana Policy Project, the hard limit was intended both to prevent any one cultivator from dominating the market through overwhelming production and to control the overproduction of cannabis.

Growers are expected to use their tier size efficiently, or face regulation. If the CCC finds that a licensee has sold less than 70 percent of what it has produced during the six months leading up to an application for renewal, it can be brought down to a lower tier.

On the other hand, if a cultivator is looking to expand production, they must demonstrate that they have been cultivating near the peak of their capacity. In order to be applicable, the grower must consistently sell 85 percent or more of their crop over the six months preceding an application for expansion.

“There was some degree of flexibility built into the tier system,” Michael Dundas, an appointee to the CCC’s Cannabis Advisory Board and CEO of Sira Naturals, told DigBoston. “It’s relatively easy for a cultivator that chooses a tier that ends up being too small for them to step up to the next tier.”

Luzier affirmed that more seasoned growers would be able to better take advantage of available space.

“An experienced cultivator will be able to use whatever square footage is available,” Luzier said.

As well, the size of a cultivator’s canopy is not the entire plot of growing space. The regulations define “canopy” as the crop’s flowering area, in which the actual cannabis flowers are formed, and excludes any space required during the prior two phases, the propagation and vegetative stages.

For a smallish startup operation, Tier 1 seems to be the clear choice. Dundas suggested that anything larger than the initial 5,000 square feet would already be “a pretty sizable business.”

“Tier 3 gets you into what I would consider a big business and Tiers 8, 9, and 10 get you into a giant business,” he said.

The microbusiness class is another option for interested entrepreneurs with minimal resources. A microbusiness license allows for Tier 1 cultivation of up to 5,000 square feet as well as product manufacturing. While licensees may not have an ownership stake in any other establishment and are locked into a smaller size, application fees and license fees are only half the combined sum of the fees for all the activities in which they are engaged. Under the plan, some are concerned that microbusiness licenses may not do enough to alleviate the financial stresses of opening a small business.

“It’s my guess that there may be some further tweaking to the concept of the microbusiness,” Dundas said. “I’m not sure that just this structure alone, the way that it’s been drafted in the regulations, is going to do all that much in terms of breaking down barriers to entry.”

“[The annual application fee of a Tier 1 license] is $1,250 per year,” Dundas continued. “So, okay, you saved yourself $600 or so per year in license fees, but it doesn’t take away the necessity to build out a MIPs (Marijuana-Infused Products) kitchen or to build a small cultivation, which can be expensive.”

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